Summary
Full Decision
ARBITRAL DECISION
1. Report
A - General
1.1. A…, S.A., with unified registration number and collective person number …, with registered office at Rua …, …, …, in Porto (hereinafter referred to as "Claimant"), filed on 27.10.2016, a request for constitution of a singular arbitral tribunal in tax matters, which was accepted, seeking, on the one hand, the declaration of illegality of the Stamp Tax assessment act relating to the year 2014, concerning item 28.1 of the General Table of Stamp Tax (hereinafter "GTST"), relating to real property of which it is the owner, as will be seen below, which gave rise to collection notices No. 2015 …, No. 2015 … and No. 2015 …, concerning the first, second and third instalments, respectively, in the total amount of €14,252.20 (fourteen thousand two hundred and fifty-two euros and twenty cents), and, on the other hand, recognition of the right to compensatory interest for the payment of unduly imposed tax obligations.
1.2. Pursuant to article 6(2)(a) and article 11(1)(b) of Decree-Law No. 10/2011, of 20 January, in the wording given by article 228 of Law No. 66-B/2012, of 31 December, the Deontological Council of the Administrative Arbitration Center (CAAD) appointed the undersigned as arbitrator, and the Parties, after being duly notified, did not express opposition to such appointment.
1.3. By order dated 16.11.2016, the Tax and Customs Authority (hereinafter referred to as "Respondent") appointed Ms. Dr. C…, who signs as C…, and Dr. D…, who signs as D…, to intervene in the present arbitral proceedings, on behalf and in representation of the Respondent.
1.4. In accordance with article 11(1)(c) of Decree-Law No. 10/2011, of 20 January, in the wording given by article 228 of Law No. 66-B/2012, of 31 December, the arbitral tribunal was constituted on 12.01.2017.
1.5. On the same date 12.01.2017, the head of the Respondent's service was notified to, if it wished, present a response and request the production of additional evidence within a period of 30 days.
1.6. On 15.02.2017 the Respondent presented its response.
B – Position of the Claimant
1.7. The Claimant is the successor of the company "D…, S.A." and has as its corporate purpose the purchase and sale of real property and resale of property acquired for that purpose, administration, asset management and leasing of real property.
1.8. The Claimant is the owner of the urban real property, which is a "land for construction", located at …, parish of …, municipality of Maia, registered in the respective property register under article …, with a tax property value (hereinafter "TPV") of €1,425,220.00 (one million four hundred and twenty-five thousand two hundred and twenty euros), to which corresponds the property card that the Claimant attaches to its request as document No. 2, the contents of which are deemed reproduced (hereinafter referred to as "Property").
1.9. The Respondent, on 20.03.2015, proceeded with the assessment of Stamp Tax (hereinafter referred to as "ST") referred to in 1.1., the collection documents relating to the first, second and third instalments of which were attached to the request for arbitral opinion as documents Nos. 4 to 6, the contents of which are deemed reproduced, which was based on article 1 of the Stamp Tax Code (hereinafter "STC") and on item 28.1 of the GTST.
1.10. According to the subdivision authorization certificate that the Claimant attaches as document No. 3, the contents of which are deemed reproduced, the Property was intended for the construction of a collective residential building and commercial space.
1.11. The Claimant proceeded with the payment of the first, second and third instalments of the aforementioned ST on 29.04.2015, 30.07.2015 and 27.11.2015, respectively, each in the amount of €4,750.73 (four thousand seven hundred and fifty euros and seventy-three cents).
1.12. On 29.03.2016 the Claimant reacted against said ST assessment by submitting a Request for Administrative Review, which did not receive any response from the Respondent's services, whereby it is presumed that on 29.07.2016, the respective deemed rejection occurred.
1.13. The Claimant alleges, first, that the assessment now contested suffers from the defect of illegality, in that the rule establishing the tax base, namely item 28 of the GTST, in the wording in force at the time of the facts, could not be applied to the Property since it is not intended for the construction of housing, but rather for the construction of collective housing together with commercial space.
1.14. Second, item 28.1 of the GTST, in the wording in force at the time of the facts, is unconstitutional for violation of the constitutional principles of contributive capacity and equality.
1.15. The acquisition of land for construction by the Claimant cannot be considered an indication of enhanced contributive capacity, but rather, and only, a true condition for the pursuit of its economic activity.
1.16. Thus, the rule establishing the tax base appears to be penalizing and discriminating real estate companies compared to companies dedicated to other sectors of activity that do not need, for the fulfillment of their corporate purpose, land for construction, which in itself is violative of the principle of equality.
1.17. Moreover, no reason can be seen for distinguishing between companies that market land for construction of residential buildings and those that market land for other purposes.
1.18. It also constitutes discrimination devoid of rational justification to tax land for construction with residential allocation and TPV exceeding €1,000,000.00 (one million euros), when it is intended for the construction of buildings with TPV below that threshold.
1.19. The compensatory interest requested is due, since the Claimant paid tax installments which it considers illegal.
C – Position of the Respondent
1.20. The Respondent understands that the contested assessment results from the direct application of the legal rule, fully respecting its letter and spirit.
1.21. The Claimant was notified of the evaluation of the Property according to the new rules of the Municipal Tax Code on Real Estate (hereinafter "MTCRE"), which confirmed that the Property is land for construction, intended for housing and with TPV exceeding €1,000,000.00 (one million euros), and the Claimant did not, at that time, file a claim regarding the results of the procedure, as was its right, whereby on 15.01.2013 the TPV of the Property and other prerequisites upon which the application of item 28.1 of the GTST depends were definitively entered in the register, consolidating in its legal-fiscal sphere.
1.22. The licensing certificate for the lots in question shows that all buildings to be constructed will be predominantly intended for residential use, whereby the Property fully falls within item 28.1 of the GTST.
1.23. Neither is there unconstitutionality, for violation of the principle of equality, in the aspect of contributive capacity, since this does not prevent, in absolute terms, any differentiation in treatment. It only prohibits the occurrence of arbitrary and unjustified discrimination, the legislator having chosen, in a rational and objective manner, a given factual requirement as the base of the tax: land for construction with TPV exceeding €1,000,000.00 (one million euros) having as sole or predominant purpose residential use.
D – Conclusion of Report and Case Management
1.24. By order dated 30.05.2017 the Arbitral Tribunal dispensed with the meeting provided for in article 18 of the Legal Regime for Arbitration in Tax Matters (LRATM), considering that the Parties had already provided the proceedings with the necessary and sufficient factual elements for rendering the decision, which was predicted to be able to take place by 19.06.2017, should the parties wish to waive their right to present arguments, which they did.
1.25. The arbitral tribunal is materially competent, pursuant to article 2(1)(a) of the LRATM.
1.26. The Parties have legal personality and capacity and have standing pursuant to article 4 and article 10(2) of the LRATM, and article 1 of Administrative Order No. 112-A/2011, of 22 March.
1.27. The cumulation of claims (declaration of illegality of assessment act, on the one hand, and recognition of the right to compensatory interest, on the other) made in the present request for arbitral opinion, in deference to the principle of procedural economy, is justified since article 3 of the LRATM, by expressly admitting the possibility of "cumulation of claims even if relating to different acts", accommodates, without hermeneutical abuse, the consideration of a claim that arises, in necessary terms, from the judgment that the arbitral tribunal forms regarding the validity of the assessment called into question.
1.28. The proceedings do not suffer from any nullity and no exceptions were invoked, whereby it can proceed immediately to consideration of the merits of the case.
2. Factual Matters
2.1. Established Facts
2.1.1. The Claimant is the successor of the company "D…, S.A.", which was subject to a division dissolution, the Property, which was owned by said company being integrated into the assets of the Claimant, by virtue of the respective public deed of "division – dissolution – merger, with constitution of company" (doc. No. 1, attached to the request for arbitral opinion, item 20 at pages 43 of said deed).
2.1.2. The Claimant has as its corporate purpose the purchase and sale of real property and resale of property acquired for that purpose, administration, asset management and leasing of real property (doc. No. 10, attached to the request for arbitral opinion).
2.1.3. The Claimant is the sole owner of the Property (doc. No. 2, attached to the request for arbitral opinion).
2.1.4. The Property was assigned the type of location coefficient: residential use (doc. No. 2, attached to the request for arbitral opinion).
2.1.5. The Property corresponds to Lot No. … of the "Amendment – Licensing Certificate No. …/08", which amends the Subdivision Authorization No. …/91, both from the Municipal Council of Maia, with an area of 882 m2, intended for construction of a collective residential building and commercial space, with an implantation area of 882 m2, construction area of 6981 m2 and basement parking with an area of 1764 m2, consisting of 48 residential units and 8 commercial spaces, with 2 floors below the threshold level and 9 floors above the threshold level (doc. No. 3, attached to the request for arbitral opinion).
2.1.6. The Property was assigned a tax property value of €1,425,220.00 (one million, four hundred and twenty-five thousand, two hundred and twenty euros) (doc. No. 2, attached to the request for arbitral opinion).
2.1.7. The Claimant was notified of the collection documents relating to the ST assessment act of 2014, concerning item 28.1 of the GTST, relating to the Property, in the amount of €14,252.20 (fourteen thousand two hundred and fifty-two euros and twenty cents) (docs. Nos. 4 to 6, attached to the request for arbitral opinion).
2.1.8. The Claimant proceeded with the payment of the first, second and third instalments of the aforementioned ST on 29.04.2015, 30.07.2015 and 27.11.2015, respectively, each in the amount of €4,750.73 (four thousand seven hundred and fifty euros and seventy-three cents) (docs. Nos. 7 to 9, attached to the request for arbitral opinion).
2.2. Unproven Facts
There are no facts relevant to consideration of the merits of the case that have been treated as unproven.
2.3. Basis for Determining the Factual Matters
The facts were established based on the documents attached to the proceedings by the Parties and the positions they assumed in the written pleadings presented.
3. Legal Matters
3.1. Issues for Decision
It follows from the foregoing that the issues to be considered are, essentially, three:
a) Whether, at the date to which the facts refer, the Property is "land for construction whose building, authorized or planned, is for residential use pursuant to the provisions of the Municipal Tax Code on Real Estate", for purposes of applying article 1 of the STC and item 28.1 of the GTST;
b) Should an affirmative answer be given to the preceding question, whether item 28.1 of the GTST is materially unconstitutional, for being violative of the constitutional principles of equality and contributive capacity; and, finally,
c) To clarify whether, should the claim for declaration of illegality and consequent annulment of the contested assessment act be upheld, the Claimant, within the scope of the present arbitral proceedings may obtain a ruling condemning the Respondent to pay compensatory interest relating to the amounts it paid to satisfy the tax installments illegally demanded by the latter.
3.2. Item 28.1 of the GTST in the Wording Resulting from Law No. 55-A/2012, of 29 October
Law No. 55-A/2012, of 29 October, among various amendments it made to the STC, added by its article 4, item 28 to the GTST, which, until 31.12.2013, had the following wording:
"28 - Ownership, usufruct or right of superficies of urban real property whose tax property value contained in the register, pursuant to the Municipal Tax Code on Real Estate (MTCRE), is equal to or exceeding €1,000,000 - based on the tax property value used for purposes of the Real Estate Tax:
28.1 - For real property with residential allocation - 1%;
As it can be seen, item 28.1, with that wording, referred to "real property with residential allocation". Now, not only does this concept not appear defined in any provision of the STC, but neither is it used in the MTCRE, a statute to which article 67(2) of the STC expressly refers when matters not regulated in the STC concerning item 28 are at issue.
3.3. The Meaning and Scope of the Concept of "Real Property with Residential Allocation"
The meaning and scope of the concept of "real property with residential allocation" cannot be determined without bearing in mind the significance of the word "allocation" itself. And this must be found in dictionaries, drawing from them the benefit of the careful study of lexicographers. Thus, "allocation" ("afectação"), according to the Dictionary of Contemporary Portuguese Language, of the Academy of Sciences of Lisbon, is the action of designating something for a determined use and "to allocate" ("afectar"), consequently, is synonymous with designating for a use or specific function.
a) The Rules for Interpretation of Tax Norms
The question to which it was first necessary to provide an answer did not dispense with, but rather implied, that the meaning and scope of the concept of "real property with residential allocation" to which item 28.1 of the GTST appealed should be ascertained. In the absence of a legal definition, whether in the STC or in any other statute, the interpreter-applicator of this provision has the duty to invoke the norms that govern the necessary hermeneutical exercise.
There is not truly a special regime for interpretation of tax norms. Article 11(1) of the General Tax Law instructs that "in determining the meaning of tax norms and in qualifying the facts to which they apply", "the general rules and principles of interpretation and application of laws" should be observed.
The general principles of interpretation and application of laws are those established in article 9 of the Civil Code:
ARTICLE 9
(Interpretation of Law)
1. Interpretation should not be limited to the letter of the law, but should reconstitute from the texts the legislative intent, paying particular attention to the unity of the legal system, the circumstances in which the law was enacted and the specific conditions of the time in which it is applied.
2. However, the interpreter cannot consider the legislative intent that does not have in the letter of the law a minimum of verbal correspondence, even if imperfectly expressed.
3. In fixing the meaning and scope of the law, the interpreter shall presume that the legislator adopted the most appropriate solutions and knew how to express his intent in adequate terms.
It should be noted, however, that interpretation of norms, also of tax norms, is not exhausted in a merely lexical exercise. It does not involve solely, nor even mainly, vocabulary dissection. It was not, therefore, a matter of knowing exactly what "real property with residential allocation" meant, but rather of ascertaining the meaning and scope of that concept within the scope of what item 28.1 of the GTST provided. In other words, as should be emphasized, there would only be procedural utility to the hermeneutical effort, within the scope of this specific request for arbitral opinion, if it were directed at discovering whether the legislator, with the wording then chosen for item 28.1 of the GTST, intended to include within it urban real properties with the characteristics of the Property.
b) "Residential allocation" – residential buildings and properties with residential allocation
The allocation of real property is a coefficient that contributes to its evaluation, as the Respondent well recalls. However, it was important to know whether item 28 of the GTST, in the wording that was in force in 2012 and 2013, encompassed both constructed buildings and those that were regarded as land for construction.
Article 6(1) of the MTCRE, with taxonomic concern, distinguishes "residential buildings" from "land for construction". The former will be, pursuant to article 6(2) of the same provision, buildings or constructions licensed for that purpose or, in the absence of such license, those that have as their normal destination that purpose. Land for construction, on the other hand, is explained in article 6(3) of the provision to which we have been referring, those for which a license or authorization has been granted, prior notice admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been declared as such in the acquisition deed, with certain exceptions.
It is thus clear that land for construction is not, according to this classification, a residential building. It was still important to clarify whether "real property with residential allocation", a concept then used by item 28.1 of the GTST, corresponded, notwithstanding the literal diversity, to "residential building", a notion employed in the classification just reviewed.
Allocation, as we learned from lexicographers, evokes the destination given to a certain asset. Now, "residential" is relative to residence, which is, in turn, and according to the Dictionary we have been using, a place or house in which one lives or dwells. Now, residential allocation cannot suggest any sense other than the action of giving to a certain asset – in the case the Property, even if it is admitted for these purposes that it is land for construction – the destination of a place or house where one resides.
It is known that the MTCRE makes use, in various provisions, of the expression "allocation". It does so, for example:
- In article 3, when referring, regarding rural real property, to use generating agricultural income;
- In article 9, when imposing on taxpayers the duty to communicate to the finance services that land for construction has come to figure in the inventory of a company that has the purpose of constructing buildings for sale or that a property has come to figure in the inventory of a company that has the purpose of its sale;
- In article 27, when relating certain buildings and constructions to the generation of agricultural income.
In all the situations presented, as can be seen, allocation is not referred to in potential terms, of vocation or of expectation. It is quite the opposite. It suggests an actual or direct destination, to use an expression to which the legislator appeals in article 27.
However, the MTCRE also makes abundant use of the expression "allocation" when it sets out the rules that should apply to the determination of the tax property value of urban real properties (articles 38 and following of the MTCRE). Could any useful element be extracted from the rules for determining tax property value that would allow us to grasp the meaning and scope of the concept of "real property with residential allocation"?
c) The Relevance of the Rules for Determining Tax Property Value
The notion of allocation of urban real property is found in the section relating to the evaluation of real property. For purposes of determining the tax property value of land for construction, the application of the allocation coefficient in the context of evaluation is clear.
It is true that for determining the tax property value of properties, consideration has been given to the "allocation" of what may be built on them.
The mere constitution of a right of potential construction immediately increases the value of the real property in question, as a function, precisely, of what may be built on it. For this reason, article 45 of the MTCRE "requires the two parts of the land to be separated": on one side, we must consider "the part of the land where [correctly, where there may come to be] the building to be constructed, and on the other the area of free land. Once the amount of the first part is determined, the value determined is reduced to a percentage between 15% and 45% (…), due to the fact that construction is not yet effectuated". It is clear that the application of that percentage allows precisely for the circumstance that there is not yet construction, but does not authorize the legislator to ignore that the economic, or market, value of land is related to its constructive capacity.
To state what precedes does not, however, mean to affirm that the legislator felt the need to impose automatic and necessary taxation, in the context of the Municipal Tax Code on Real Estate, on all land. It suffices to read what is provided in article 9(1)(d) of the aforementioned MTCRE:
ARTICLE 9
(Commencement of Taxation)
1. Tax is due as of:
(…)
d) The 4th year following, inclusive, that in which land for construction has come to figure in the inventory of a company that has the purpose of constructing buildings for sale;
(…)
That is, even if the legislator considers it reasonable, as it appears to be, to determine the tax property value of land taking into account its constructive capacity and, granting the benefit of the argument, the nature or vocation of what may be built on it, it remains symptomatic that it chose, at the same time, to suspend that taxation in cases where such land figures in the inventory of a company that has the purpose of constructing buildings for sale. In cases where, one could also say, such urban real properties are part of a productive process that tends to continue and to produce, downstream, fruits also taxable.
If the principal sense of "allocation", as we have said, suggested an actual, direct destination given to a determined asset, we do not see how this understanding could be disproved by the finding that the legislator, within the scope of the evaluation of land for construction, authorizes the use of the allocation coefficient, having in view what may be built on it. In truth, it did not seem reasonable to admit in this scenario the resort to norms for determining the taxable base to expand the prediction of the rules establishing the tax base.
In light of the foregoing, the proper interpretation of what is provided in item 28.1 of the GTST in the wording applicable to the years 2012 and 2013 required the understanding that residential allocation of an urban property suggested that it be given that actual destination, or that it be capable of being directly given that destination.
It is not to be said that this judgment collides with the possibility of seeing applied to land for construction the allocation coefficient to which reference is made in Section II of Chapter VI of the STC. In truth, one thing is the rules that the legislator imposes for determining the tax property value of land for construction, it being unsurprising that consideration be given to its constructive capacity and the nature and vocation of what may be built on it, another, quite different, is to contend that these rules be invoked to delimit the field of the normative prediction of the rules establishing the tax base.
Indeed, the interpretation that we adopt here, and widely supported by judicial and arbitral case law, is in harmony with what appears to have been the intention of the Government, author of the proposal that resulted in this imprecise legislative intervention.
At the time of presentation and discussion, in Parliament, of draft law No. 96/XII (2nd), the Secretary of State for Tax Affairs expressly stated[1]:
"The Government proposes the creation of a special tax on high-value residential urban properties. It is the first time in Portugal that special taxation has been created on high-value properties intended for residential use. This tax rate will be 0.5% to 0.8% in 2012 and 1% in 2013, and will apply to homes valued at equal to or exceeding 1 million euros."
Now, the Secretary of State for Tax Affairs presented this draft law using the expressions "residential urban properties", which are those contained in article 6(1)(a) of the STC and, as the Respondent well notes, "homes", it being manifest that, in either case, in these concepts lands do not fall, as such, even if for construction.
Thus, notwithstanding the inadequacy of the legislative technique and without prejudice to the subsequent wording, it followed with crystal clarity that item 28.1 of the GTST could not be interpreted in the sense that within it were encompassed real properties with the characteristics of the Property, for the reasons stated above. Rather it appears that the meaning and scope of the concept of "real properties with residential allocation" was the equivalent to "residential buildings" mentioned in article 6(1)(a) of the STC.
3.4. Item 28.1 of the GTST in the Wording Given by Law No. 83-C/2013, of 31 December
With the amendment introduced by Law No. 83-C/2013, of 31 December, item 28.1 of the GTST came to read as follows:
28.1 - For residential building or for land for construction whose building, authorized or planned, is for residential use, pursuant to the provisions of the Municipal Tax Code on Real Estate;
Let us then determine whether the Property, with respect to the ST assessment of 2014, is encompassed by the rule establishing the tax base.
The parties agree that the Property is land for construction. Now, we have already reviewed article 6(1) of the MTCRE, with respect to the distinction between "residential buildings" and "land for construction", that is, those for which a license or authorization has been granted, prior notice admitted or favorable prior information issued for a subdivision or construction operation, and also those that have been declared as such in the acquisition deed, with certain exceptions, as is read in article 6(3) of the same provision.
However, the concern of the interpreter-applicator of the norm should not be limited to the concept of "land for construction". Such exercise would be devoid of any utility if it ignored the rule establishing the tax base that invokes it.
In truth, more than knowing whether the Property is, or is not, land for construction, which is indisputed, what matters is to ascertain whether the Property is, for purposes of item 28.1 of the GTST, "land for construction whose building, authorized or planned, is for residential use, pursuant to the provisions of the Municipal Tax Code on Real Estate". This is the point, with respect to the 2014 assessment.
It is not the mere entry in the property register as "land for construction" that entails the ineluctable application of item 28.1 of the GTST, since it does not, by itself, constitute conclusive demonstration that a determined property has a building for residential use planned.
See in this regard JOSÉ MANUEL FERNANDES PIRES, (Lessons on Property and Stamp Taxes. Coimbra, Almedina, 3rd ed., 2015, pages 110 to 112): "The right to build is not inherent in the right of ownership, but only arises anew in the owner's assets when an administrative act of the competent public entity recognizes and authorizes the owner to build or to subdivide. [...] only when such right is constituted in the owner's legal sphere is it that the Municipal Tax Code on Real Estate establishes that we are faced with land for construction".
Thus, it seems clear that for verification of the normative prediction it is not sufficient merely the registration in the property register of a property as land for construction allocated to residential use, since the delineation of the objective scope of the tax base now in question does not give up the demonstration of an actual potentiality of construction, necessarily revealed by the existence of documentary supports that authorize it. In other words, the incidence of the tax, for purposes of what is provided in item 28.1 of the GTST, only materializes, and even then not in definitive or complete terms, with the verification of an "actual allocation", to use the felicitous expression of JOSÉ MANUEL FERNANDES PIRES (op. cit., p. 507). In the same sense, see, among others, the CAAD Decision rendered in case No. 524/2015-T.
Now, without demonstration of that actual constructive potentiality, item 28.1 of the GTST does not appear applicable. However, for purposes of applying item 28.1 of the GTST, that actual constructive potentiality is not sufficient. It is necessary to prove that the building, authorized or planned, is for residential use. In other words, it cannot be for a purpose other than residential use, since building for commercial or industrial purposes would not give rise to the application of the norm to which we have been referring.
Now, in the Property, as has been seen, it is provided in the Subdivision Authorization Certificate issued by the Municipal Council of Maia the construction of a building for collective residential use and commercial space, with an implantation area of 882 m2, construction area of 6981 m2 and basement parking with an area of 1764 m2, consisting of 48 residential units and 8 commercial spaces, with 2 floors below the threshold level and 9 floors above the threshold level.
It is true that the Property is registered as "land for construction" allocated to residential use, nevertheless, it is clear that construction is authorized not only for residential purposes but also for commercial purposes, no distinction being made between the areas intended for residence, in the proper sense, and the others that show having the alternative allocation.
What can be safely concluded is that the legislator did not intend to tax, in the context of ST, by application of item 28.1 of the GTST, land for construction whose authorized or planned building was intended for commercial purposes. It intended only to tax those intended for residential use. Now, given this legislative choice, which may indeed raise the question of whether such an aim is compatible, in particular, with the constitutional principle of tax equality, that item cannot be applied to a property for which the construction of units intended for commercial purposes was authorized. Where the legislator distinguished, the interpreter-applicator cannot pretend to ignore the distinction.
Thus, the assessment called into question suffers from the defect of violation of law, because based on what the arbitral tribunal understands to be an erroneous interpretation of item 28.1 of the GTST, due to error regarding the legal prerequisites.
3.5. On Compensatory Interest
Article 24(1)(b) of the LRATM provides that "the arbitral decision on the merits of the claim from which no appeal or challenge lies binds the tax administration as of the end of the period provided for appeal or challenge, and the latter must, in the exact terms of the substantiation of the arbitral decision in favor of the taxpayer and up to the end of the period provided for voluntary execution of decisions of tax court judgments, restore the situation that would have existed if the tax act that is the object of the arbitral decision had not been performed, adopting the acts and operations necessary for that purpose".
It is not ignored that the legislative authorization granted to the Government by article 124 of Law No. 3-B/2010, of 28 April, on the basis of which the LRATM was approved, determines that the tax arbitral process constitute an alternative procedural means to the process of judicial impugnation and to the action for recognition of a right or legitimate interest in tax matters. Although articles 2(1)(a) and (b) of the LRATM ground the competence of arbitral tribunals in "declarations of illegality", it seems reasonable to the understanding that there are comprehended in their competences the powers that in the process of judicial impugnation are attributed to tax courts, it being certain that in processes of judicial impugnation, in addition to the annulment of tax acts, claims for indemnification can be considered, notably relating to compensatory interest.
Indeed, the principle of cognoscibility of indemnification claims, in administrative review or in judicial process, is justified whenever the damage that is sought to be redressed results from a fact attributable to the Tax and Customs Authority. We find manifestations of this principle in article 43(1) of the General Tax Law and in article 61 of the Code of Tax Procedure and Process.
Thus, it is justified to consider the claim for payment of compensatory interest filed by the Claimant.
Compensatory interest is due when it is determined, in administrative review or judicial impugnation, that there has been error attributable to the services from which there results payment of the tax debt in an amount exceeding that legally due.
Now, having the Claimant paid the tax that by the contested assessment was, by error attributable to the services, demanded of it, it has the right not only to reimbursement of all it paid but also to receive compensatory interest calculated from the date of payment of each of the installments, until its complete reimbursement.
3.6. Issues Made Unnecessary
As it is the understanding of the arbitral tribunal that the assessment called into question suffers from the defect of violation of law, because based on an erroneous interpretation of item 28.1 of the GTST, the consideration of the issue of unconstitutionality raised by the Claimant is made unnecessary.
Decision
In light of the foregoing and with the grounds stated, the arbitral tribunal decides:
a) To uphold the claim for arbitral opinion with the consequent annulment of the contested assessment, with all legal consequences, notably the reimbursement to the Claimant of all amounts paid by it, relating to the assessment now annulled;
b) To uphold the claim for a ruling condemning the Respondent to pay compensatory interest, at the statutory rate, calculated from the date of payment of each of the three tax installments now declared unduly demanded, until their complete reimbursement.
Value of the Case
In accordance with article 306(2) of the Code of Civil Procedure, article 97-A of the Tax Procedure and Process Code and article 3(2) of the Costs Regulation for Tax Arbitration Proceedings, the value of the case is fixed at €14,252.20 (fourteen thousand two hundred and fifty-two euros and twenty cents).
Costs
For the purposes of article 12(2) and article 22(4) of the LRATM and article 4(4) of the Costs Regulation for Tax Arbitration Proceedings, the amount of costs is fixed at €918.00 (nine hundred and eighteen euros), in accordance with Table I attached to said Regulation, to be borne in full by the Respondent.
Lisbon, 12 June 2017
The Arbitrator
_______________________________
(Nuno Pombo)
Document prepared by computer, pursuant to article 131(5) of the Code of Civil Procedure, applicable by reference in article 29(1)(e) of Decree-Law No. 10/2011, of 20 January and using the spelling prior to the aforementioned Orthographic Agreement of 1990.
[1] See Official Journal, I Series No. 9/XII-2, of 11 October, page 32.
Frequently Asked Questions
Automatically Created